There’s a New Tax Break If You’re 65+

The sweeping new federal tax law that went into effect in early July provides a potential tax break for anyone at least 65 years old.

Before I explain the new tax rule, I want to be clear what was not part of the tax law that Congress passed and President Trump signed into law:

There were absolutely no changes to Social Security. None.

• Benefits current recipients receive, and the formulas that set benefits for future recipients, were not changed.
• The rules on taxation of Social Security were not changed.

Do you hear me? No. Changes. To. Social. Security.

I promise to keep you updated on any changes that Congress does consider (and enact), but for now, I want to make sure you have the facts: nothing has changed to Social Security benefits.

Now let’s talk through what did change.

Beginning this year, anyone who is at least 65 years old may be able to claim a $6,000 income tax deduction. You are eligible even if you have yet to start claiming Social Security. There is no link between this new tax break and Social Security.

Here are the key rules:

• This new $6,000 per-person deduction is in addition to the already existing deduction available to anyone at least 65. The existing deduction is $2,000 for single filers and $1,600 each for married couples filing a joint tax return.
• You can claim these deductions whether you take the standard deduction or file an itemized tax return.
• To claim the full new  $6,000 deduction ($12,000 total for married couples if both are at least age 65), your modified gross income must be below $75,000 for single tax filers and $150,000 for married couples filing a joint tax return.  Note: these income limits apply only to this new $6,000 deduction benefit. There is no income limit to claim the older (and continuing) deduction of $2,000 for individual filers and $1,600 per person for married couples, which remains in effect.

Above those income levels, you can still qualify for a reduced deduction. But single filers with MAGI above $175,000 and married couples with MAGI above $250,000 are not eligible for any deduction.

• This additional tax deduction is available for the 2025, 2026, 2027, and 2028 tax years. Under current law, it will no longer be available beginning in the 2029 tax year. And please note: this temporary tax break is only for the new $6,000 deduction. The $2,000/$1,600 per married person deduction for people at least age 65 is permanent.

A potential $6,000/$12,000 tax deduction is a big opportunity for many households. The key is to make sure your income will not be above the limits to grab the tax break.

For those of you who have been converting traditional IRA or 401(k) assets into Roths—and for those of you considering conversions—you will want to plan around this new law. When you convert traditional retirement savings to Roth retirement savings, the entire amount of the conversion is treated as taxable income in the year you make the conversion.

If you intend to make any conversions in 2025, 2026, 2027, or 2028, and you will be at least 65, be aware of how it could impact your eligibility for this $6,000/$12,000 tax deduction in each of those years. If you have yet to turn 65 and want to convert large sums, it may make sense to convert more now so you will also be able to claim this deduction once you turn 65.

Sitting down with a trusted tax pro to consider your options is a smart move.